Thursday, September 30, 2010

They Just Play Politics With Our Money

Two years ago the Reid-Pelosi Congress went home without passing the appropriations bills to fund the federal government's spending programs. The reason then was that they expected Candidate Obama to win the presidential election and they wanted to pass $400 billion in spending increases without the threat of a Bush veto.

This year they failed to pass budget resolutions as required by law, and have failed to pass the appropriations bills as well.

Hey, why not? Who do you think is in charge here? The people?

This time, of course, the most ethical Congress ever has a different reason for putting off the appropriations bills. The solons know they are deeply unpopular and they don't want any unpopular votes getting into their opponents' TV commercials.

It all goes to show that Joseph Schumpeter was right. Politicians are people who are professionals at winning elections. Everything else they do is by courtesy. Maybe they'll pass a budget; maybe they'll actually record a vote or two. Maybe they'll educate a child or two, maybe they will fix up their ramshackle patronage system.

But for sure they will collect the taxes and print the money.

We know that the American people are getting ready to make the biggest change in Congress in living memory. We just don't know by how much.

And why not? Let's have some fun. Politicians are fungible. You can defeat them here, but the same kind of chaps will get elected over there.

The real problem, Medicare, will still be there after the fun and games and the accusations and the October surprises are over.

Yeah, I know, Social Security and Medicaid are important, but nothing like the problem of Medicare.

Personally, as a senior about to enroll in Medicare, I'd be willing to pay more for my health care and take less of the government's subsidy. But the deal is this: I want to control my health care arrangements. I want the government's cotton picking hands off my health insurance. I want to be able to have a big deductible and I don't want government telling me what should or should not be included in my catastrophic health insurance policy.

Surely that ain't too much?

Meanwhile back to the campaign trail, and let's see how nasty it gets in the homestretch.

Wednesday, September 29, 2010

Telegraphing a Wipeout

The Democrats have taken to blaming the voters in recent days. Vice-President Joe Biden has even blamed the Democratic base and told it to buck up and stop whining.

Folks like John Podhoretz are telling the Democrats that this is very bad tactics, even though Joe Biden is right.

So what if President Obama has delivered just about all that his progressive base could expect, given that there is such a thing as a moderate Democrat in the land? The base wants more.

The big problem for Democrats this year is that politics runs on rage. You get your best turnout when you are out of power and you are telling your supporters that the current incumbents are crooks, liars, and tyrants. But once you get into power, the motivation of your supporters becomes a much more difficult matter.

In 2002 and 2004 the Bush team performed miracles of voter mobilization, staying in power under difficult circumstances. But by 2006 the base was exhausted, and the Democrats motivated moderate voters to cast their votes against the tired, corrupt Republicans.

Mind you, it takes a special talent to turn your base into discouraged complainers in a mere two years.

But forget all the talk about stupid Democrats bad-mouthing their supporters. What the top Democrats are really telegraphing is that the battle is over for 2010. They have lost and they know it.

But it is kind of mean-spirited to start blaming their supporters for lack of energy. Let's face it, when you know that the battle is lost, it becomes very hard to get up the energy to keep on fighting. Nobody wants to be the last guy to die for a losing cause.

After a losing battle the generals generally get to fly away in their helicopters. The grunt on the ground may well lose his life in the agony of defeat.

Monday, September 27, 2010

"Pledge" a Start or a Cop-out?

What are we to make of the House Republicans' "Pledge to America?"

Veteran pundit Michael Barone is mildly complimentary. He writes that the Pledge has two pretty serious proposals, to roll back discretionary spending to 2008 levels, and repeal ObamaCare.

But Andrew McCarthy thinks it's a cop-out. "It's big wind, little rain," he complains.

Listen, retorts Jonah Goldberg, it's just an opening bid.

Hey, fellahs, this is politics. You do things a step at a time. The Republicans cannot tell the American people that we'd like to rip the welfare state out by the roots, even if we do eventually want just that. It would just scare the pants off them.

Sure, we believe that the liberal culture of compulsion should be repealed, and that the natural sociability of the American people should replace the force and injustice of the liberal administrative state.

But here's the big difference between conservatives and liberals. We want to persuade the American people, step by step, that a voluntary, sociable society is better than a compulsory centralized state.

Our liberal friends, as they have just demonstrated with ObamaCare, don't believe in stuff like that. They believe that the way you get social change is to hustle the American people into a vast expansion of government and create new special interests to defend the new order so that, when the American people find out what ObamaCare will cost them, it will be too late because the special interests will take out any politician that dares to cross them.

It's important to understand the difference. Social democracy is the triumph of the compulsory and the powerful expert. Then there is middle-class democracy. For middle-class democracy, the process is the point, not the destination.

Can we reform the welfare state? Will the American people ever agree to give up their entitlement benefits in return for freedom and voluntary, shared provision of necessary social goods like education, health care, and relief of the poor? Nobody knows. But the American people certainly don't like the idea of the sudden, overwhelming increase in government power and spending under the Obama administration.

And that's a start.

Friday, September 24, 2010

They Just Don't Get It

As liberals survey the wreckage of the car they drove into the ditch, they ask themselves: how did it happen?

It feels like one moment they were accelerating rapidly into the fast lane, and the next moment they were in the ditch.

But there is a glimmer of understanding over at The Atlantic. Joshua Green rewinds to the successful effort of Sen. Schumer to elect Democrats to the Senate in 2006 and 2008.

Democrats have always claimed to be the party of ordinary working families, but Schumer thought they were deluding themselves. Most Democratic policies, such as the earned income tax credit or increasing the minimum wage, were geared not toward the middle class but the poor. When middle-class Americans heard Democrats describe their problems, it did not resonate because they were actually the problems of the working poor. Schumer believed that the true middle class comprises people in the prime working years of 25 to 60, whose median household income is around $68,000. He urged his candidates to tout aspirational policies that would appeal to them.

So Schumer concentrated like a laser on appealing to the middle class with candidates that ran on aspirational themes in their campaigns. But now it's all in the toilet. How could that be?

Democrats did health care. And they fixed the financial system, which will help middle class 401(k)s.

Pursuing a different agenda might have been more popular. But the real frustration for the White House is that each of these policies does benefit the middle class, but the benefits tend to take the form of increased security or cost savings difficult for most people to quantify. Over time, health insurance will be more comprehensive, secure, and affordable; Wall Street meltdowns won’t occur as often, and when they do occur they’ll cost taxpayers less. Clearly, these advances have not registered, or have not been sufficient.

What planet are you on chaps? The fact is that Obamacare is going to hurt most Americans, now and forever, and only help wasters that ought to have health care, but are skating, for now. The bank bailout was necessary, but the middle class rightly feels that it should never have been necessary. The bailout was government cleaning up the mess it made of the credit system, not government cleaning up after a natural disaster.

Get real Democrats, and stop deluding yourselves. You had the sense to know that you had lost your appeal to the aspirational middle class. What you didn't have the sense to do is dump your policies that screw the aspirational middle class. Obamacare, stimulus, auto bailouts, cap-and-trade: these are all policies aimed at the Democratic base, from union stalwarts to the benefit recipients, to the government employees to the gentry liberals. There is nothing in the Obama record that benefits the aspirational middle class.

If Democrats really wanted to appeal to the aspirational middle class they would have ditched the entire agenda and implemented a program of spending cuts, to release resources for new businesses that could hire the aspirational middle class.

But they didn't do that, and now they are going to pay. The only question remaining is the price: will it be a modest 40 seats in the House, or a massive 80 seats? Will it be 6 seats in the Senate or a massive 10 seats?

We will know in about a month.

Thursday, September 23, 2010

Gov. Default: Not When But How

We peasants have the wrong idea about government default. It doesn't necessarily mean that the government flat out defaults on its debt. Most governments are smarter than that. Nor does default necessarily mean hyperinflation. Most governments aren't Weimar Germany or modern Zimbabwe.

The best way to think about default is this. Governments make promises all the time; politicians make promises to get elected. But once elected politicians must choose which promises to keep. The result is that governments default on their promises all the time. But this time is different. This time it is going to be worse. Here how Arnuad Mares puts the argument:

In other words, some or all of its stakeholders must suffer a loss: either taxpayers (through a higher tax burden), or beneficiaries of public services (through lower expenditure) or bond holders (through some form of default).

When you put the argument like that, you realize that governments are defaulting on promises all the time. Usually, they default on taxpayers. Sometimes they default on the voters that get government benefits. Occasionally they screw the bondholders. And they are doing stuff like that all the time. You think that they never default on the bondholders in advanced countries like the US? Think again.

Examples include: the revocation of gold clauses in bond contracts by the Roosevelt administration in 1934; the experience by then Chancellor of the Exchequer Hugh Dalton of issuing perpetual debt at an artificially low yield of 2.5% in the UK in 1946-47; and post-war inflationary episodes, notably in France (post both world wars), in the UK and in the US (post World War II).

The basic skill of politics is to default in the least damaging way--for the ruling class, of course. Today's situation is interesting because the government is clearly coming up against the limits of taxation. Meanwhile they are trying stealth default on Medicare promises through the reduction in Medicare Advantage benefits. And they are inflating the dollar, which screws the bondholders.

The question is: what's an asset holder to do? Dodge the IRS? Don't get completely dependent on government benefits? Keep out of dollar-denominated assets?

The problem with a defensive strategy like that is that in the long run we are all dead. You could reduce your tax exposure, but that takes money in lawyers and tax accountants. You could stay robustly independent, but why pass up the free money? You could stay out of bonds and bank accounts, but that means getting into riskier equities and "real values."

Most likely, the government will squeeze through with some tax increases, some spending cuts, and some inflation.

But with the highly competent Obama administration, you never know.

Tuesday, September 21, 2010

America's Unchanging Two Party System

According to the political scientists, the United States has enjoyed five party systems, ending up in today's Republican/Democratic Party division.

But really, it's always been the same.

There has always been a middle-class commercial party and there has always been a populist power-to-the-people party.

The Federalist/Whig/Republican Party has always believed in an America where if you study hard and work hard you can make a decent standard of living for yourself.

The Anti-federalist/Democratic-Republican/Democratic Party has always believed that you need a politician to fight for the people against the powerful.

For the rich and powerful, there has always been a temptation to lead the populist party. Thus Thomas Jefferson, slave-owning landowner, affected a man-of-the-people image when he arrived in Washington DC to become president in 1801. Ditto Franklin Delano Roosevelt, scion of Dutch padroons. Ditto the Kennedy clan, rich kids of a successful Wall Street speculator.

When they first emerged onto the political stage the Progressive movement of educated youth ran against the powerful city machines and their patronage politics. It was the genius of the liberals of the 1930s to convert the elite Progressivism of the turn of the 20th century into a vanguard cadre to lead the down-scale big city machines and give their crude patronage/clientage politics a patina of good government.

President Obama and his liberal allies in Congress have scorched off that patina in an acid bath, and the great middle class in America now sees the Democratic Party as an unalloyed patronage party, to which you belong if you think that the only way to get ahead is as the rank-and-file in some political army.

The defeat of Mayor Fenty last week is a sign that maybe the white gentry liberals, the heirs of the elite Progressives of 100 years ago, are reaching their limit in the patronage/entitlement/identity/jobs-for-the-boys politics of today's Democratic Party.

The Tea Party, on the other hand, is a pure expression of middle-class commerical politics. Worried about debt and ruinous spending, it is forcing the Republican Party away from a mushy capitulation to patronage politics and back to his origin, the robust politics of the commercial industrial state conceived by Mr. Federalist, Alexander Hamilton, in the early 1790s.

How will it all turn out? My judgement is that the key to the future is middle class women. The feminist movement turned women to the left, and got them to believe in patronage politics for a while. But I think that middle-class women are not voting their interest when they vote for patronage, identity, feminist politics. Women stand or fall by the families they build and the children they raise to adulthood. Welfare state patronage politics plays merry hell with all that, and women are not stupid. They are trusting, and they believed the feminists when they told them that they needed to stand for women's rights. But women are not stupid. They know what their children need in a global competitive economy, and it is not the patronage politics of the Democratic Party.

All this is to say that the two party system lives and you ain't seen nothing yet!

Monday, September 20, 2010

Will the Dems Split?

Like Aunt Em, I have waited all my life for the Democratic Party to split. Now, finally, Michael Barone has reported on a possible split between gentry liberals and public-sector unions. But because I am a realist, I can't get too excited about it.

Actually, what he reports is not a split but the public-sector unions beating the pants off the gentry liberals in places like Washington DC. In the mayoral primary last week the tony liberal areas voted for reform Mayor Adrian Fenty. Too bad. Fenty was defeated in the Democratic primary by Council President Vincent Gray. Fenty has been working to reform the schools and the city government, but that cuts no ice with teacher unions and government employee unions. They don't care about lousy schools and overmanned, inefficient city services. They just care about their jobs, their paychecks, and their pensions.

Does this mean trouble for the Democrats? Barone:

Gentry liberals and public employee unions were allies in the Obama campaign in 2008. But now they're in a civil war, in city and state politics.

Civil war? Really? I suspect that there is less here than meets the eye. Gentry liberals may not be unionized and they may like the idea of helping kids and fixing up municipal services, but not if it means breaking a sweat.

Gentry liberals occupy the sweet spot in the big-government universe. They are the managers, the directors, the principals, the government lawyers, the journalists. Their boat is floated by the sea of rank-and-file employees that deliver the votes.

Expect to see gentry liberals wringing their hands about welfare and family breakdown, about underperforming schools and inefficient municipal services. But don't expect them to vote to cut their cushy jobs in the higher reaches of the education blob or the university or the regulatory maze.

But the gentry liberals will be perfectly happy to let their union thugs take all the incoming rounds from the Tea Party and others. While they stay above it all.

I'd say that the chaps who ought to be thinking about splitting are the educated youth. They should realize that they are screwed, and better forget about their idealistic careers in government. But it may take them a while.

Friday, September 17, 2010

Here's Extremism For You

Well, so Christine O'Donnell is an extremist. That is what our Democratic friends want voters to believe. I guess that's what you get when you run seminars on the women in Lord of the Rings.

But if you chaps want extremism how about this?

In the United States there's a party that champions a program to force every worker to pay a tax amounting to 15 percent of their wages. At the end of 40 years the government pays the worker a "benefit" every month, as the mood takes it, until the worker dies. The money belongs to the government. All told, these government pension programs costs $1 trillion per year. And the government pension programs will all go broke in the next 30 years. Of course, if you'd paid 15 percent of your wages into a bank account, you could have lived off the interest and passed the principal on to your children. How extreme is that?

Here's another example of the extremism that we just take for granted.

The government forces every senior citizen to belong to a government health care program which yields a crazy quilt of benefits and puts the government in between seniors and their doctors. Combined with other government health care programs, it costs about $1.1 trillion a year, and there is no money to pay the benefits in the out years. Based on current taxation levels, we are short something like $30 trillion to pay the benefits promised by the government to seniors over the next generation. Of course, seniors could decide to look after their own health care, since seniors, in general, are the richest Americans. That means something at a time when young people are hurting badly in the Great Recession, and, when they have jobs, pay the taxes for all this and have children to raise and mortgages to pay. How extreme is that?

We have extremist education too.

The government forces every parent to send their children to a government child-custodial facility from age 7 to 16. It costs about $1.0 trillion a year. After the government has held these children in custody for ten years here is the result. On adult literacy, about 15 percent of Americans are "below basic," which is a polite word for functionally illiterate. About 50 percent of kids entering college require remedial courses. How extreme is that?

Here's another extreme situation.

The government forces everyone to pay for their vast establishment of programs for the relief of the poor. The result is a vast underclass, the utter collapse of the family among low-income Americans, and a stealth gray area of people on disability pensions. But this program is cheap. It only costs about $0.75 trillion a year.

For a generation at least, conservative Americans have been agitating to reform these programs, to reduce their reckless overpromising, and to reform their administrative failures. But a certain party, filled with extremists, has demonized every attempt at reform.

Who cares, you might say? Conservative Americans are prudent, careful people who will survive when the balloon goes up and the government defaults on its promises. Why should we care?

Well, the truth is we do care. We don't want the clients of the Democratic Party to wake up one day and find that the party's over and that, as they say in Eastern Europe, they'll be reduced to eating the paint off the walls. We want the folks on government programs to live decent, dignified lives.

We just believe that you can't have dignity when your life depends on some politician bringing home the bacon. There's a word for that kind of society. Feudal.

Thursday, September 16, 2010

Republicans Eating Their Own?

This week we are back to the old meme: Republicans eating their own.

How come this only happens to Republicans, the usual suspects whine?

The answer is that the Republican Party is a different animal from the Democratic Party. And as I look around the blogosphere this morning I see that everyone agrees with me. Roger Kimball gets it, almost:

That’s the thing that scares people about the tea party. It operates outside the jurisdiction set down by the other parties, be they Democratic or Republican. All those sources of patronage, wells of political preferment, reservoirs of prestige, perquisites, and power: That’s what politics as usual is about. It has built up an impressive institutional structure.

That's OK as far as it goes. But here is commenter ZenPundit on a ChicagoBoyz blog about NPR's difficulty in understanding the Tea Party.

First, a majority of the Left are still in the “community organizer”, Alinskyist, protest theater, organizational front group, grievance-victim-social-justice paradigm adhered to and honed since the 1930’s by the Marxists, Social Democrats, organized labor and the New Left. They want a centralized nanny-state themed to race and gender issues and approach politics with a vanguard mindset where talking points are issued by the leaders and everyone must stay in lockstep.

We need to understand that the Republican Party, though it certainly deals in "wells of political preferment, reservoirs of prestige, perquisites, and power," only does it to a limited extent. It offers jobs to people who work in the federal government when Republicans are in power. Otherwise Republicans go about their daily life in the private sector. That makes the Republicans much more loosey-goosey.

But the Democrats are different. The whole point of the Democratic Party chaps is to organize a patronage system for themselves and their clients fed by government revenues. If you are a Democrat you probably earn your living in the education establishment, or a health/welfare bureaucrat or client, an NGO activist, or a government program benefits recipient. Your whole life is organized around the continuance of that government salary or benefits. Obviously, Democrats cannot relax for a moment. They must stay organized in their citadels of government largesse, ready to repel insurgents at any moment. Because if the Republicans ever took that money away...

The Democratic machine presents an awful power to the world. It has to. For anyone that breaks ranks, well, there's always the ancient threat: That's a nice little teaching job you got there. Pity if anything should happen to it.

But we should take our inspiration from that other formidable political machine, the Soviet Union. It specialized in frightfulness, right up until the day that it collapsed, as the Marxists like to say, of its internal contradictions.

The problem with the Democratic Party is that it has promised itself and its supporters loot and plunder that cannot possibly be delivered. Sooner or later the whole thing is going to collapse, because it will just run out of money.

When people worry about the lack of unity in the Republican Party, they have a point. But in the long term, this lack of unity is a strength. The really scary thing is the rictus of smiling unity in the Democratic Party. The day that smile breaks will be a day to behold.

Wednesday, September 15, 2010

Today GOP Elite Freaks. In November...

Hey, GOP establishment, I feel your pain. All the nice plans you made to get to 51 in the Senate look like they are compromised by the primary victory of Christine O'Donnell.

And I agree, she seems like a piece of work. Reminds me of another chap, name of Bill Clinton. A little bit of trouble keeping the story straight.

Glenn Beck had the mot du jour. Today, the Republican establishment is freaking, he said on his radio show. But that is just the beginning. Wait till the MSM starts freaking. Wait till the Democrat establishment starts freaking.

Naturally, establishment Republicans are worried that the defeat of RINO Republicans means that Democrats will elect people in Republican districts and the result will be that there will be no Republicans in the Northeast.

Maybe. That is certainly the lesson of the last ten years. Democrats have been able, time and time again, to brand social conservatives as way out radicals. But that was then. This is now.

The Preserve RINO strategy is a defensive strategy. It is a holding operation, trying to accommodate the natural domination of Democrats in the Northeast.

But the point of the Tea Party movement is to change the status quo. It is to energize natural conservatives and to begin the process of persuading moderates and independents that a Republican Party of common-sense conservatism is their kind of party. That's what a movement does. It moves the country.

When you start to do that, you leave behind the nice comfortable assumptions of the old order. You enter a revolutionary phase, where Americans are open to persuasion, where voters are up for grabs.

So the question becomes, should you use the strategy of the Allied World War I generals, and advance in lockstep, a step at a time? Or should you adopt the strategy of the German General Staff, that subordinate commanders down to the squad level should always be ready to exploit opportunities?

My feeling is that we are in new territory. My feeling is that the 50-50 nation of the past ten years is history. (Yeah. Remember 50-50 nation? Seems like ancient history!) My feeling is that we don't want to be fighting the last war.

And let's get back to the Germans again. In the Franco-Prussian War, General von Moltke had a real problem with over-enthusiastic unit commanders getting their units into trouble. But these tactical reverses didn't matter because Moltke had his armies in the right place at the right time. The French with their Chassepot rifles might win a local victory, but next day they would have to retreat.

That's where we are today. American politics is changing, and nobody knows where it is going, and where we will end up. It isn't going to be safe, and the old gang is going to have to give up its power.

In my view the Democrats will have a much bigger problem with that. But right now they are too busy laughing as the tsunami bursts over the GOP establishment. But don't worry. The tsunami is heading right their way. They are just too stupid to realize it.

Tuesday, September 14, 2010

Why Isn't Stimulus Working?

Supply-sider extraordinaire Alan Reynolds says that the verdict over the Obama stimulus is simple. Stimulus is Snake-oil. It never works. And it didn't work in the 1930s, despite the testimony of two generations of Keynesians.

Guess what, he writes. The so-called FDR stimulus wasn't anything like the Obama stimulus.

The budget deficit peaked at 5.9 percent of GDP in 1934, falling to 4 percent in 1935. Today, the Congressional Budget Office adjusts such deficits for the impact of recession, which would convert the deficits of 1934-35 into cyclically adjusted surpluses. That is, the US economy grew by 10.9 percent in 1934 and 8.9 percent in 1935 without any "fiscal stimulus."

Today's budget deficit is somewhere north of 9 percent of GDP.

The argument over Keynesian stimulus depends on what you think is the problem when there's a downturn in the economy.

The Keynesians argue that the problem in a recession is a lack of aggregate demand. Pump out some stimulus and you'll revive demand and restore the economy to the status quo ante.

The opposing argument, advanced by the Austrian School of economics, is that the problem in a recession is the collapse of the capital investments made in the previous boom. A recession is the period of adjustment during which the bad investments made in the previous unsustainable boom are liquidated.

Actually, other peoples' bad investments aren't that much of a problem unless they were financed with borrowed money. Why is that? Simple. If you make a bad investment with your own money, you don't have to liquidate and sell at a loss. If you make a bad investment with borrowed money, there is hell to pay.

Suppose you save money for 20 years and then go out and buy a house for cash at the top of a boom. House prices go down 20 percent and you lose your job. Now you have lost 20 percent of your investment. You have a problem. But you suck it in and carry on. You take a lower-paying job, of course, but that's ok because you don't have a big mortgage.

Suppose you go out and buy a house with 10 percent down at the top of a boom. House prices go down 20 percent and you lose your job. Now you have lost all your investment. Plus you have defaulted on your mortgage and lost your house. Plus you (and millions of others) have reneged on your promises and put the bank underwater. Taking a lower-paying job won't help because you need the income from the high-paying job to make the mortgage payments. Now you are broke and the bank has a problem. Not just the bank but the whole financial system.

Hey, this finance business ain't that hard.

There is nothing magical about Keynesian stimulus. It is just the way that governments always act. Rulers like to concentrate all the resources of society on one big thing. Maybe it is a war. Maybe it is a mega-project to go to the moon, or to give everyone a low-money-down mortgage, or health insurance. Either way, the ruler commandeers the financial system and orders everyone to pull together for the Big Push. It works for a year or two until everyone has to get back to ordinary life: making a living and paying for the kids' education. Then we are all screwed.

The problem the US faces is not a lack of aggregate demand, whatever that means. The problem is that millions of people got in way over their head in the housing market. They borrowed money that they couldn't afford to repay unless house prices went up forever. When people can't repay their debts it puts the whole financial system at risk. It doesn't matter whether the millions of people did this because of greedy bankers (the Democratic line) or stupid government housing subsidies (the Republican line).

The question is: how do we go forward?

The simple answer for us today that we can't go forward until we have liquidated the bad real-estate investments made in the great housing boom.

And it doesn't seem that a big stimulus is going to do a thing to solve that problem.

Mr. President: your turn.

Monday, September 13, 2010

Rhett Butler Conservatism

Liberals are still playing the race card. Hey, it's not personal; they think all conservatives are racists.

But Gerard Alexander in the Washington Post wants to persuade liberals that, rationally, you could argue that conservatives aren't racists, not really. Even if there are good reasons for thinking that we are. It wasn't just Nixon and the Southern Strategy that brought the South into the Republican camp. According to Haley Barbour, it was the young activists like him that first moved to the Republicans in 1968. The older generation came later, if at all.

But I think that this is all vieux jeux. (Or as Rush would say, liberals playing out of a 30-year-old playbook.) We conservatives are past caring whether liberals think we are racists. All the emotional race-card manipulations of little Miss Scarlett O'Liberal have got us to the point where we don't care any more.

Call us racists, why don't you. Frankly my dear, I don't give a damn. That's what Rhett Butler conservatives think. And those are the moderate ones. There are Breitbart conservatives too, and they are what you might call Eff You conservatives. They believe in throwing the race card right back in the liberals' faces.

Shannon Love at the ChicagoBoyz has a better idea. His argument arises out of the visceral hatred liberals have for Sarah Palin. He reckons that it is status anxiety. Leftists have a "vastly superior understanding of everything compared to ordinary people." Therefore there cannot be a Sarah Palin, an ordinary person juumped up into a national politician. Why, she doesn't even read the New York Times, dahling.

The left has had a bad experience since the 1960s when lefties last had a shred of a reason to believe that they had a special knowledge.

The Great Society failed, the ’70s were an overall train wreck and the once great Democratic cities of the Northeast collapsed. People voted with their feet again but this time migrating from blue areas to red areas. In this process the left lost its meritorious claim to status.

But at least liberals know that they are better than conservatives because conservatives are racists!

Otherwise, Rhett, where shall I go? What shall I do?

Frankly my dear, I don't give a damn.

Friday, September 10, 2010

Cue Roy Orbison: "It's Over!"

Back in the early Sixties when I was a teenager in Britland, the weirdest thing imaginable was the wailing falsetto of Roy Orbison and the naive puppy love-songs of the Everly Brothers. For a Brit kid, it seemed to come from another world.

We now know, of course, thanks to President Obama, that those country boys came from the world of God and guns bitter-enders.

But I think that Roy Orbison may be getting the last laugh. I'm starting to think that is is time to cue up "It's Over" on President Obama and the Two Years of Folly.

Somehow, over the Labor Day Weekend the earth moved, and so the usual fluff from the MSM pundits just reads as laughable. Here is what RealClearPolitics dragged up today:

GOP Caused Economic Uncertainty - Mark Schmitt, American Prospect

Obama Needs to Fire Up His Base - Joe Conason, New York Observer

What Ever Happened to Obama's Army? - Jay Newton-Small, Time

Obama's Finally Speaking Like a Democrat - Bob Shrum, The Week

Obama Should Follow in FDR's Footsteps - Nick Taylor, Los Angeles Times

Koch Fires Back at The New Yorker - Elaine Lafferty, The Daily Beast

Do you get the feeling that these chaps are just out of it?

Meanwhile conservative pundits are smelling blood in the water.

The Nanny State Has Blown the Bank - David Warren, Ottawa Citizen

America's Public Servants Are Now Its Masters - Mort Zuckerman, FT

Dems Across the Country Running from Obama - Kimberley Strassel, WSJ

The Lost Communicator - Michael Gerson, Washington Post

Obama's Looking More Like Hoover Than FDR - Jonah Goldberg, NRO

It's Jonah's piece that I like best. He's discussing the collapse of the great liberal myth:

The creation myth of the modern Democratic party goes something like this: After years of capitalist excess, exemplified by Hoover's "market fundamentalism," Franklin Delano Roosevelt introduced reasonable and pragmatic reforms that not only conquered the Great Depression but "saved democracy" itself.

When FDR & Co did this number on the American people it was a tour de force of political myth-making. And it has lasted right up to the present, because there was always a cadre of liberal opinion hegemonists available to ram it down the throats of the American people one more time.

But now it looks like the "narrative" of the current Great Recession will go rather differently. Somehow, I suspect that the Democrats will get the blame. Why? Well here's my guess.

In the Great Depression the government's stupid response with the NRA wage and price controls, the WPA the CCC was disastrous. Not to mention the Wagner Act that boosted wage rates and Social Security that created a whole new tax on labor. But people felt that it was all helping people like them. It showed, in the classic line, that government "cared about people like me."

Here's the problem with Obamanomics. People don't think it helps "people like me." The money is all going to help union construction workers and unionized government workers. Not "people like me."

Yep. Obamanomics has all been about helping the Democratic base, and screw the moderates that actually elected President Obama.

It takes a level of political stupidity far deeper than the notorious stupidity of President Bush to execute an agenda like that. But President Obama and his crew were up to the challenge.

And that's why it's time to sing "It's Over."

Thursday, September 9, 2010

Now the Dog's Being Hunted

My old Greek pal George Maroutsos had a saying that no doubt originates in ancient Greek mythology.

"You can't tell a dog when it's out hunting," he would say. "You can only tell how good it is when it is being hunted."

In the long-ago days when Candidate Obama and then President Obama was out hunting, we dog fanciers knew that we couldn't yet tell what he was made of.

But now that the Labor Day polls have spoken and we know that the Democrats are in a rerun of the 1854 mid-terms, we can start to get an idea.

What's that? 1854 mid-terms? Michael Barone takes the credit for that one. You see, in 1854 Sen. Stephen Douglas (D-IL), pushed the Kansas-Nebraska Act through a very Democratic Congress. He figured that letting Kansas and Nebraska decide for themselves whether to allow slavery would put the issue to bed. It turned out he was wrong. Instead, he lit the fire for the Civil War. The Republican Party emerged out of the ruins of the Whig Party, and Democrats lost 76 seats in a 250 seat Congress that year.

Now that he is in trouble, what is President Obama doing? He is getting out into the old union heartlands of the rust belt and doing the populist thing. He is doing what a politicians does; he is dividing the voters into Us and Them. He is talking trash talk to the union working stiffs.

Now the president is in political trouble. Now the Democrats running in swing districts don't want him anywhere near them. Now Democrats are not uttering a whisper about ObamaCare on the stump.

Now we are getting to see the real Obama. He is not really bad, not evil. He turns out to be an ordinary politician that has read his polls and has determined that there is only one thing he can do this Fall that will help Democrats. He must go out an rouse up the old union base and get them to the polls to limit the GOP pickup in normally safe Democratic districts.

It means, of course, that this practical politician has written off the moderate middle, the chaps and chapettes that got him elected back in 2008. It means that the Democrats are in worse trouble than we can possibly imagine. It means that you young chaps are going to experience an election that you can talk about to your grandchildren.

(As for those of us that already have grandchildren, I suggest we tell them to pay attention, because this is new, and hip, and exciting, and has never happened before in the history of the earth.)

After the deluge, in January, we will see how good the president is with a Congress that wants to repeal everything he has done in the last two years.

How well will he perform? My guess is: not too well. I have a feeling that President Obama is a good hunter, but not very good when he's being hunted.

Wednesday, September 8, 2010

I, Economy vs. I, Government

We are having, this fall, a national conversation. It is one that liberals would rather we didn't. That's because, as Attorney General Eric Holder might say, we are cowards.

The conversation is about the limits of government. What should government do, and what shouldn't it do?

Conservatives say that government should be limited. It should do defense and policing and law, and very little else. When it gets beyond the area of force, the defense against enemies foreign and domestic, it makes a mess. That's because government turns everything it touches into a contest of power. It always gets to be a fight to see who gets to wield the power of the state.

Jonah Goldberg has a column today, "I, Market Economy," that tells why government makes such a mess with everything it does. Why? Because everything that we make in the world is unbelievably complex. Take the pencil.

“I am a lead pencil — the ordinary wooden pencil familiar to all boys and girls and adults who can read and write.” It is one of the most simple objects in human civilization. And yet, “not a single person on the face of this earth knows how to make me.”

Even a product as simple as a lead pencil is a product of a vast collaboration of producers and experts and middlemen and consumers and prices advertised and prices paid.

The lessons one can draw from this fact are humbling. For starters, any healthy civilization, never mind any healthy economy, involves unfathomably vast amounts of harmonious cooperation.

But government isn't harmonious cooperation. Government is force.

Government says: this is the way we are going to do education, so fall into line. But Mr. President! Over here! We've got an idea we would like to try out! Forget it, pal. Come back in ten years when you've got a political movement, and you can move the needle on my next election.

With I, Government, there is only one way, and that way is the way of the most political powerful coalition. With I, Economy, there are a million ways. Mostly, of course, the market economy follows the big bucks. Millions of people want Wal-Mart's Always Low Prices. But some people want quirky old-fashioned bow ties. And they get them--off the internet. Millions of people want fast food good and cheap. They get it, at McDonalds. But some people want fresh food grown locally. They get it--in some liberal enclave at an organic food cooperative.

In I, Government, the ruling coalition gets its way, and that's it until the revolution. In I, Economy, the majority gets its way. But so does the minority. And there is always room for a nobody to find a niche that nobody ever thought of. It always looks like the big boys run the show. But below the radar the next Bill Gates or Steve Jobs is working away to change the world.

I, Government likes to wield power. But its power is always the power of the gun and the billy club. All it can do is bruise and intimidate. That's why government always mucks up the economy. All taxes and all credit manipulations hurt the economy. But if you keep tax rates down, and money sound, the damage that government's billy club does is minimized.

President Obama wants to raise income taxes on the rich, from about 35 percent on marginal income to about 40 percent. And he wants to raise the FICA tax too.

You can talk all you like, Mr. President, about sharing the wealth, and that at some point you don't need any more money. But when you are taxing at 25, 30, 35, 40 percent of marginal income you are laying about you with a billy club and you are bruising the harmonious cooperation of the market economy.

Progressives, Goldberg concludes, like to say that "we're all in it together." Another progressive line is the idea of shared sacrifice. These communitarian notions are best applied in a crisis when people willing stop what they are doing to devote themselves completely to helping their neighbors in distress.

But what progressives fail to see is that the market economy is a day-to-day realization of "we're all in it together." We are all out there trying to make a living and learning every day that earning a living means giving other people what they want. We must each of us sacrifice our druthers--our dreams and fantasies--in order to serve other people and thereby earn a living.

Some day, humans will discover a method of social cooperation far better than the market economy. But here's a nickel that says that it won't be a government scheme to "share the wealth."

Tuesday, September 7, 2010

Democrats Betray Creative Class

Ever since the emergence of the Christian Right in the 1970s Democrats have been able to stigmatize socially-conservative Americans as narrow-minded and bigoted. This has helped them to a large share of the "creative class," Americans who don't think much about social and moral issues, but sense that traditional values crimp their freedom to live a life of

wholehearted dedication to a freely chosen course or cause, and not to any truth anchored in a collectivity or a world beyond the individual[.]

That quote is from Existentialism vs. Marxism by George Novak. So we should recognize that creative Americans are existentialists of a kind.

For years Democrats managed to create a divide between "creative" Americans and "traditional" Americans. If you were young and educated you probably didn't want to be counted as a traditional American.

Just to be on the safe side, liberal professors and administrators made colleges into sexual free-fire zones, always a winner with the young set.

Creative Americans come in different shapes and sizes, but obviously there is a divide between the economically creative, i.e. business owners, and the culturally creative, i.e., artists, writers, academicians. Democrats have owned the culturally creative for decades, but in recent years they have managed to detach the business class from their natural home in the economically conservative and now unfashionably cultural conservative Republican Party.

In the 2000s the young generation of entrepreneurs clearly got persuaded that they didn't need the embarrassing Republican Party. The Clintonesque New Democrats understood business and had moved away from knee-jerk liberalism. And after the Reagan and Bush tax rate cuts, who needed the Republicans?

People like Richard Florida started writing books about the creative class that lived and worked in "ideopolises." John B. Judis and Ruy Teixeira wrote a book about The Emerging Democratic Majority that would center on minorities, young people, and the creative class.

This strategy worked like a champ while people believed that the Democrats were economically centrist and socially liberal. But people don't believe that any more.

The economic meltdown and the proposed huge expansion of big government has been a wakeup call for the economic creative class. Now all of a sudden economic issues matter to them. And the embarrassment of the Christian Right doesn't seem quite so important.

This is the great achievement of President Obama. He has thrown away the economic creative class. If he had governed from the center, done Clintonesque New Democrat things to the economy, and put off the nationalization of health care till the economy had improved, then he would have had the creative class for a generation.

But now he has thrown it all away.

Of course, the reality is that the Democrats were never really "New Democrats." They were faking it back in the 1990s because that was the only way they could get elected.

Then they got back into power in 2006 on the back of the second term mid-term election syndrome. They could talk about an unpopular war and corruption and family values and get elected to a majority in Congress.

After 2008 with a Democratic president and big majorities in Congress they decided that they should go for the big one: health care. Big controversial entitlements never get repealed. After all, in 1936 they got Social Security. In 1965 they got Medicare. This time they would do ObamaCare and in ten years everyone would love them.

When generals do that sort of thing they are accused of trying to fight the last war.

We conservatives should thank our lucky stars for Obama. He has sent a whole generation of Americans back into the Republican tent. He's made them see that tax policy and spending policy and credit policy really matter. He's probably inoculated them for a generation. In fact there's a possibility that we may even be able to do something about entitlement reform in the aftermath of Obama.

There's a good chance that we are looking at a generation of Republican majorities.

Everything will be practical and sensible until a new generation arises that knew not Obama.

But that's in the long run, and in the long run we are all dead. As the childless John Maynard Keynes said.

Monday, September 6, 2010

A year late Mr President

Talk about a day late and a dollar short. Only now, two years after the political class knew that the recession was a big one, is the president coming up with business tax cuts. At least that is what is being predicted for the president's speech on Wednesday.

Apparently the president will propose $100 billion in business tax cuts including an R&D tax credit and $35 billion in small business tax cuts.

Frankly, Mr. President, the fact that you are coming up with this crowd-pleasing package now, within 60 days of an election, an election in which your party is expected to get clobbered, is a very good reason to vote against you.

You are telling us that only when you have been hit over the head with a 2 by 4 are you willing to propose a sensible, practical economic policy.

Look, I understand that politics is power. I understand that politicians don't give a damn about the economy except to the extent that it can deliver revenues to the government.

But the American people have a right to expect that, when they elect a president, he would be sensitive to the needs of the economy. We don't expect the president to be way out ahead of public opinion, but we do expect him to be right there in the center of conventional wisdom.

We believe it is outrageous when the president is just about the last person in America to realize that the way you stimulate the economy is with changes to the marginal costs that businesses must pay, i.e., taxes and government mandates.

And conventional wisdom has held for a while now that straight Keynesianism is not an appropriate response to a downturn in the economy. Why? Because Keynesian economics does not really comprehend that all business decisions are taken at the margin. It just sprays out money to political favored constituencies and hopes that everything will return to normal when the government runs out of spray money.

There's an old story, Mr. President, about killing the goose that lays the golden eggs. When we talk about the economy that means thinking about how government decisions affect businesses. If you raise income tax rates on high-income business owners, then the chances are that the business owners will have less money to expand their businesses. If you have high tax rates on corporate income then chances are that corporations will get over-leveraged and find themselves badly burned by an economic downturn.

Only now, Mr. President, after your economic policies have failed to restart the economy, only now with electoral disaster staring you in the face, are you proposing economic policies that are semi-oriented towards helping economic recovery.

I'd say, Mr. President, that when an administration bungles economic policy has badly as yours has done, that there is only one thing for the voters to do: throw the bums out.

But then, that's why I voted for you back in 2008. I figured that nothing would cure the voters of Democratic government faster than Democratic government.

As usual, I was wrong. I had no clue, no clue how fast the American voters would reject the people and the policies of the Democratic ruling class.

Now, about those entitlements, Mr. President.

Friday, September 3, 2010

The Jobless Recovery

So here we are at Labor Day and there's been an uptick in employment. Which is good.

Yes, I know that the unemployment rate ticked upwards from 9.5 to 9.6 percent, but that's normal in the early part of a recovery as people who have given up looking for work return to the labor force. You have to be "looking" to be counted in the labor force.

Actual employment went up.

According to the Labor Department Household Survey civilian employment went up from 138.96 million 139.25 million. That's a tad under 300,000.

But these charts tell you the real problem. Here's the civilian labor force since 2006.

And here's the civilian employment.

I reckon that's what you call a jobless recovery. Of course Democrats were all over President Bush back in the mid 2000s when unemployment was 6 percent. So I suppose turnabout is fair play.

But the charts do show what a dog's breakfast President Obama has made over economic policy. We don't need ObamaCare. We don't need stimulus programs to save the jobs of teachers. We don't need higher energy prices. We need lower taxes on business so that business owners can have the confidence to grow and hire more workers. We need to get that number of the employed from just under 140 million and crank it up to 145 million. Pronto.

Any ideas, Mr. President?

Thursday, September 2, 2010

Next Year's Agenda

Some people are getting impatient. They are asking why the Republican Party doesn't have a party position for the mid-terms. Other people are looking forward already to a Republican Congress. They are asking how the Republicans should avoid the mistakes of 1995.

I think the critical thing is to tell the truth and shame the devil. That's Shakespeare, by the way.

For the Fall election it is critical for Republicans to promise what they really intend to do come January. It's not hard to come up with a doable agenda: continue the Bush tax rates and lower corporate income tax rates; repeal ObamaCare and start over on a non-bureaucratic approach to health care; cut wasteful spending.

The American people are not yet ready to cut entitlements. They need to see the entitlements system broken before they will agree to that. But there's plenty of other stuff to work on. There is the utter waste of government money in education, for starters. Then there is green energy, that is crony capitalism from start to finish. Then there is the fabulous ethanol program. There are tons of things that can be cut at the margin as governors like Mitch Daniels and Chris Christie have shown.

After the elections, whatever the result, President Obama will have to start working with Republicans. No more "I won," or telling people to shut up while he fixes things that Bush broke. Republicans should start working with the president, or at least urgently saying to the media that they need to get together with the president and solve the nation's problems.

The people have spoken, Republicans should say. But the president is still the president, and we are all Americans. We should work together. What the people have told us is that they don't like bailouts, they don't like stimulus, they don't like ObamaCare, and they don't like earmarks. So let's get together, Mr. President, let's clean up the nation's capital as you promised in 2008 and get about the people's business.

Personally, I feel that President Obama is no Bill Clinton, and that he just doesn't have the talent or the temperament or the experience to do a good job negotiating on the issue-by-issue process of day-to-day government. I think he's a guy that likes to say: call me in when it's time to call the big shots.

But the Republicans must treat the president as the president. If he won't deal straight--and I don't think he will--then they need to go to the media and the talk-show hosts and tell them about it.

But Republicans must start out in September with a clear and honest agenda, and then continue in January saying: let's get together Mr. President and let's work together for the American people.

Wednesday, September 1, 2010

2010 Isn't 1994, etc.

People in the political world like to sneer at generals for "fighting the last war." So what is all the talk of 1994, and the worrying about a Republican Congress overreaching in 2011 in a reprise of 1995?

As Ronald Reagan said: to say that Congress spends money like a drunken sailor is an insult to drunken sailors. And the re-fighting the wars of 1994 and 1995 is an insult to generals.

The only thing we know is that 2010 won't be a replay of 1994 and that 2011 won't be a replay of 1995. However, like any general that has studied recent wars, it certainly doesn't hurt for us to recall the lessons of 1994 and 1995.

First of all, 1995 may have been a tactical defeat for Republicans in that President Clinton "won" the government shutdown. But in the medium term Republicans actually did reduce the rate of increase in spending. The problem for Republicans was not 1995, it was 1998. That was the year when the budget went into surplus and President Clinton started saying telling Americans that, yes he could cut taxes and return money to the taxpayers but then maybe the taxpayers would waste it. That was voters started to think that we could relax the purse strings a little.

That sentiment gave us the 2000s and a Republican Congress that gorged itself on earmarks.

Anyway, all the talk about debt and deficits and bailouts rather misses the point. The whole key to the federal spending problem is, #1 Medicare, #2 Medicaid, and #3 Social Security. That's where the money is.

The Medicare problem is simple. Affluent middle-class seniors (like me) will have to pay full freight on health care. It is simply unjust for people with money (i.e., older people with savings) to tax the hides out of 30 somethings much less wealthy than they are. The fact is that most middle-class seniors can afford to pay for our own health care. And we should.

Of course, that might mean that a lot of seniors won't be able to afford to become snowbirds and winter down south.

When we affluent seniors start to pay full-freight on our health care we will start to find ways to economize on health care. We will revolutionize health care and all of a sudden health care costs will stop their exponential rise into the stratosphere.

Once the Medicare problem is solved, then Medicaid will follow. Don't know how, but it will. The American people will demand it.

Social Security? You can fix Social Security with a financial coup de main. For instance, you can capitalize current benefits by awarding Social Security beneficiaries special Treasury bonds that pay off Social Security benefits and then privatize the whole thing. Again, it's a matter of justice. People in their fifites and sixties should save, big time, for their retirement. And guess what: our savings will go to create the jobs for the 30 somethings. As is should be.

When will middle-class seniors be ready to pay full freight on health care? When Medicare is completely broken. And that won't be in 2011.

So Republicans won't be doing a grand reform on entitlements in 2011. But Republicans can start the ball rolling by offering, e.g., a New Medicare that offers a fixed subsidy that you can apply to your own health insurance plan.

One thing is for sure. We are living in interesting times.